Xi consolidates power further in crackdown on open letter

Even as the steady drumbeat of Western reports about the intensifying resistance to Xi Jinping manifested by the open letter - such as here, here, and here - runs its predictable course, the cold hard reality is that he has already won another round of repression of internal dissent and civil society. The crackdown has effectively preempted any credible challenge to his "core" leadership and has paved the way for an unencumbered second term starting with next year's 19th party congress.

Even while claiming that the party has been "rattled"  by the open letter, the New York Times relays that the nascent party mutiny has been squelched:

Mr. Cai said he received a new letter on Monday claiming to be a petition of 171 “loyal party members” urging Mr. Xi to quit. He said he chose not to publish that one. He said: “As it was also anonymous, it lacks credibility.”

Lack of credibility? Get serious. If Mr. Xi's security goons hadn't gone on an international witch hunt, these 171 "anonymous" "loyal party members" would be competing with the writers of the original "anonymous" letter for a place in the revolutionary sun.

The original March 4 letter has the tone of a putsch, as Xiao Qiang confirms:

Xiao Qiang, an adjunct professor at the University of California, Berkeley, who monitors Chinese media for the website China Digital Times, attributed the response in part to the letter’s unusual phrasing. “Bluff or true, this tone sounds more like coup plotters talking to the leader they want to depose, rather than an open letter with dissenting political views,” he said.

By contrast, this new petition seems to be 171 political idiots foolishly believing all the anti-Xi hype generated by the Western media into thinking that the moment is actually ripe for a new spring.

Sure, Xi and co. are "rattled" - more plausibly, genuinely annoyed by these nuisances (while not exactly petty, they're still essentially nuisances). It's the dissenters themselves who are now petrified.

Open letter demanding Xi's resignation now seems at most a silly putsch (even by putsch standards)

This Asia Times editorial offers a good alternative analysis of what's really going on with Xi Jinping's recent media mishaps. Unfortunately, it increasingly looks like the vaunted open letter demanding Xi's resignation was, if not an outright hoax, a silly putsch even by putsch standards.

Mind you, Xi is indeed establishing direct personal control of the state media - but he's doing it by playing down his own personality cult, not augmenting it.

The compelling evidence is that the CCDI memorandum which effectively slams the cult of personality remains accessible to Chinese netizens - a clear indication of Xi's personal approval of it. It thus follows that, far from an overreach of personal authority, the recent intensification of the state media campaign to promote him - and silence his detractors, i.e. Ren Zhiqiang - may have instead been a deliberate attempt to discredit him. It depends how far you want to surmise that propaganda chief Liu Yunshan, a current Politburo Standing Committee member believed to have been promoted by Jiang Zemin (though not formally a member of Jiang's "Shanghai clique"), has been tussling with Xi for control of the party's messaging.

In fact, whether or not it was an intended effect, the excessive "Xi-ist" propaganda of late and general muzzling of dissent has so broadly equated the central party leadership with Xi himself that it's become a political liability to the latter, not least within the party itself. It thus made sense for him to do an about-face and pose as an enlightened leader always welcoming of well-intentioned criticism from subordinates; one can't even rule out that the CCDI memo was in fact his idea.

So, whether or not Liu wanted to take a swipe at Xi by puffing up his boss' image, the boss is probably much further ahead of the political perceptions curve than first meets the eye. And it's pretty convenient for Xi, too, that Mr. Liu - set to retire at age 70 next year along with everyone else on the Standing Committee save himself and Li Keqiang - can be a fall guy of sorts if the media continues to be a source of trouble.

To conclude, in that light the open letter seems increasingly implausible as anything other than an attempt to further tarnish Xi's credibility within the party by elements within the party which stand to benefit from such a fall from grace (even if not an outright resignation). Everyone who's gotten on the record about it has denied or repudiated it, and while the state's characteristic heavy-handed response exacerbates Beijing's chronic credibility problem, for sure, as it becomes clearer that there's no such thing even approaching a viable internal party opposition anyway, by process of elimination you have to narrow it down to one of the most pathetic putsch attempts against a major authoritarian regime on record - so much so that it's not a stretch at all to just dismiss it as a hoax (or even prank).

In the meantime, though, there's some real good news to celebrate: Xi appears to have little choice now but to expose himself to legitimate criticism, after all.

Why does China matter so much if US trade with it is barely 2 percent of GDP?

In an interview with CFA Institute, Gordon Chang, as ever, essentially argues that not only is China on the brink of collapse, but that it simply doesn't matter too much for the rest of the world.

We won't rehash Gordon's same old arguments here (based, as ever, on assuming that the most pessimistic unofficial estimates of Chinese economic figures are the right ones); instead, the question that concerns both the US and global economy is, Why does China matter so much if trade with it is barely 2 percent of US GDP? More specifically, just why would a large yuan devaluation - say, 15 to 30 percent, as some well-known hedge funds have recently wagered - have such an outsize impact on the rest of the world?

It all boils down to the simple fact that the present global economy has been built upon the growth of US dollar-denominated international trade and capital flows - an unprecedented expansion of which China has been the linchpin. It may be less than 2 percent of US GDP, but that 2 percent is absolutely critical not just for the two economic superpowers, but everyone and anyone else, as well.

Interestingly, China's importance only becomes apparent when you consider the entire global economy as essentially an integrated whole based on the US greenback as the universal medium of exchange. Destroy the value of the yuan, and China dramatically constricts the supply of such international dollar - or "Eurodollar" - liquidity worldwide. This is the crux of the renminbi's virtually existential threat to the global economy as we know it.

It's important to retrace just how we got here. At the end of World War II, the US was the undisputed global economic superpower. America's combination of roughly half the whole world's industrial output, massive capital account surplus, and vast stockpile of gold reserves which burgeoned during the war years owing to its safe-haven status, enabled Washington to establish the Bretton Woods monetary system by fixing the dollar at $35 per troy gold ounce (later $42). This was the basis for the free, capitalist world's commercial and economic livelihood, which Washington further underpinned with the Bretton Woods institutions of the World Bank and IMF.

From the get-go, however, the gold peg proved hard to resist tampering with. Demand for credit, especially from the market-making financial and corporate sectors, inexorably outstripped the supply of hard physical gold, and because Treasury bonds and other dollar-denominated debt were widely perceived as "gold with interest", both domestically and among US allies - which were effectively Washington's protectorates against the Soviet and communist bloc - by the 1960s the original gold link had loosened to such an extent that it needed just one big-enough impetus to all but disintegrate.

That catalyst, it turns out, was the US proxy war with the USSR and, more immediately, Mao's China, in the former French colony of Indochina: the Vietnam conflict drained Washington's finances so badly that by around 1968, when it became clear that no quick victory could be won over Hanoi without bringing Beijing (then wracked by the lunacy of Mao's Cultural Revolution) into the fray, America's Western allies (as well as Japan) famously began a concerted run on both the dollar and its residual physical gold backings within American vaults. By the time president Nixon officially ended the gold standard in 1971 and "free floated" it to counterattack US allies in their currency war, the debasement of the greenback was already a done deal, with his actual policy largely a formality.

However, America wasted no time not only retaining its control of global capitalism under a purely fiat currency regime, but actually enhancing it - arguably dramatically. Its allies quickly discovered that their complete dependence on Washington's military protection against a Soviet Union that had achieved strategic nuclear parity meant that they were even less autonomous in a solely credit-based monetary setup than under the traditional bullion one. Next, in the aftermath of the 1973 energy crisis, the US skilfully crafted, in the remainder of the decade, the infrastructure of the "petrodollar" - forging a strategic alliance with Saudi Arabia and the other oil-rich states of the Persian Gulf region whereby the greenback's erstwhile exchange peg to yellow gold was effectively replaced by a new, deliberately exclusive procurement arrangement with black gold (and hence other commodities) that gave it an even more practicable lever of regulating real international economic activity. In the meantime, the dollar's free float unleashed the floodgates of monetary and credit innovation and expansion in the vast domestic US market. This coincided, not incidentally, with the birth of the high-tech IT industry.

Though it took the US the remainder of the "staglation" era of the 1970s into the early 1980s to finally settle into a sustainable "new normal" of credit-based economic expansion, the rewards it reaped in doing so were astronomical. The much-touted "supply-side" theories touted by leading economists of the period were, in practice, the reflection of the rise of a truly global supply chain of unprecedented size and sophistication: Western technological and managerial know-how working in conjunction with the cheap hydrocarbons of the Mideast, the commodities of friendly Latin American and African countries, and the cost-effective labor of East Asia (led by Japan but followed by the "little dragons" of South Korea, Taiwan, Hong Kong, Singapore, and to a lesser extent Thailand and Malaysia).

Thus, from the very start of Nixon's opening to China in 1972, prescient US political and economic strategists understood that it would be the middle kingdom's eventual integration into the dollar-based global economy - as the great center of mass production and assembly - that promised to deliver the crowning triumph of global capitalism in its centuries-long ascent from Protestant Western Europe. Indeed, even the early tremors of this Chinese reorientation towards the free-market camp in Mao's waning years was enough to compel the Soviet Union to unwittingly hasten its own demise through the opening of détente.

As reform and opening took off under Deng Xiaoping in the 1980s, China positioned itself to become the pivotal member of the emerging global dollar hegemony - that decade being the twilight of the defunct and discredited Soviet model that Gorbachev would find impossible to rescue without breaking up the USSR itself in the process. After surviving the existential identity crisis of Tiananmen Square in 1989, Beijing arrived at a convenient accommodation with Washington: the latter found that the former's autocratic internals were only a minor irritant in light of the exploding profit margins and credit expansion that its vast pool of cost-minimizing labor could give its transnational supply chains; whilst the former recognized that its stubbornly Western-incompatible political values were ironically best protected and served by collusion in enriching that same West.

The rest has been history: the history of Chimerica. A mercantile relationship which blossomed in the Clinton years (1993-2001) would reach a maturity and stability unprecedented between such disparate great civilization-states in the Bush era (2001-09). The decade from 1995 to 2005 - with China's attainment of permanent trade status with the US (2000) and acceptance into the WTO (2001) in the middle - was not by chance the golden period of the "Eurodollar", i.e. the Wall Street and London-led "financialization" of the global economy via the explosion of derivatives-driven investment banking. China was the axis of this bubble-finance monetary regime: its sheer productive volumes and cost savings were the basis of the dollar-denominated corporate profits and trade surpluses which overwhelmingly fed (largely via the US Treasury markets) into the two successive waves of greenback asset boom-busts, namely the dot-com (1997-2002) and housing (2003-2007) tsunamis.

An inflection point of sorts was reached in the 2008-09 global financial crisis, whose sheer scale had its origins in the London Eurodollar operations of a company, AIG, that had been founded by Jewish-American expats in Shanghai around the May 4 movement (1919). It was this crisis which literally brought the Western financial system to its knees - in effect, a 500-year crash, not merely a 100-year crash - that effectively propelled China to the very forefront of the global economy, over half a millennium after the middle kingdom fatefully sealed itself off from the outside world. From 2009 to 2012, China's massive fiscal and monetary stimulus - with its unprecedented binge of commodity consumption to fuel an investment boom of monumental proportions - effectively rescued the global economy from a broad recession; though we now see that it did so at a high price.

It is this history of the Sino-US relationship - the single bilateral relationship that drives the entire global agenda - that China cannot now fall without also scuppering. To understand the turmoil of 2015 and early 2016, one need look no further than this stunning fact: China is on the verge of crashing in US dollar terms.

By extension, that means the world as a whole - the entire Eurodollar system - is on the verge of a sharp contraction. The RMB is the last line of defense. Its feeder commodity partners (and hence currencies) - from fellow BRICS Brazil, Russia and South Africa, to OECD members Canada and Australia, to Mideast petro-states like Saudi Arabia and various other mineral-rich South American and African economies - have all suffered various degrees of dollar-measured decline or collapse since 2013. Since oil prices crashed in mid-2014, thanks largely to the last great Eurodollar play in the West - the US shale revolution - the yuan has stubbornly clung for dear life against the dollar even as the euro, yen, and pound sterling fell more liberally into 2015.

Against this backdrop, it's easy to see why global financial markets have responded so poorly to even 2 to 3 percent falls of the yuan: if it's possibly just a harbinger for a 20 or 30 percent (or, at least theoretically, unlimited) devaluation, there goes the global Eurodollar standard. We'll have a "strong dollar" alright - just less and less of them sloshing around anywhere. For the S&P 500, given how richly valued it tends to be thanks to foreign capital inflows, 1,400 could be the new 2,000.

But don't take my word for it: maybe Gordon Chang's right that this will only be a minor development after all. It's an adjustment that, while painful, is largely necessary to fix the severe inequities and imbalances on both sides of the Pacific - and hence worldwide. In the long run, Chinese growth should come less from trade just as US growth should depend less on foreign capital inflows; in the long run, neither country even needs growth per se as badly as fairness in its distribution.

And in the end, we'll all be one big happy family - if only because the alternative isn't just unthinkable, it's downright ludicrous.

China's political crisis could be over even before it began

Cracks have appeared in Fortress Xi Jinping. The gathering crisis of the communist party's attempt to remake itself from within, excluding popular or democratic participation from without, has finally come to a head.

As with any crisis, however, there is both threat and opportunity: indeed, it is precisely the seriousness of the threat that reveals the depth of the opportunity.

The threat is that Xi Jinping has become so fed up with the party's entrenched special interests that he's about to reinstate a totalitarian personal dictatorship to wipe it out. This would be equivalent to applying massive doses of radiation to destroy a cancerous tumor, only to kill even more healthy tissue in the process.

While Xi's cult of personality clearly originated with his genuine conviction that China needs strong leadership, it has grown to the point of endangering the party's long-term effectiveness in governing both itself and its subjects. That would appear to be the crux of an internal memorandum of the Central Committee for Discipline Inspection (CCDI) urging legitimate self-criticism as the key to governance.

For Xi's party supporters, the grave danger is that even if he strong-arms the bureaucracy into pushing through the right policies today, he will have acquired so much additional power in the process that no one will be able to stop him from carrying out the wrong policies tomorrow.

Thus, the opportunity: if Xi takes this criticism from within his camp, rather than the true opposition from without, as just what's needed to save his administration for not only the remainder of its current term, but also the next starting at the 19th party congress next fall, he can effectively end China's political crisis practically before it even begins - provided he truly doesn't wish to make himself a little Mao.

Publicly, don't expect him to back down: he must continue to project a confident and powerful image, if much more measured in the blatant self-aggrandizement - at least for the time being.

Privately, however, he has no choice but to win back the shaken trust of those party moderates who were always willing to give him the benefit of the doubt - until he really went a little too far.

A new equilibrium in Chinese politics could already be emerging. At the National People's Congress (NPC) earlier this month, for what appeared to be the very first time, Premier Li Keqiang snatched the limelight from the dominant Xi, who had long overshadowed and even apparently marginalized him in managing (at times micromanaging) the economy.

As well, a rare public admission of misstatement by Heilongjiang governor Lu Hao concerning the plight of coal miners in his province could indicate a new openness about the magnitude of the problems of downsizing state-owned zombie firms.

Chinese and foreign observers alike need more such indicators of normalcy and transparency in actual state functions in the coming months of painful economic restructuring, in order to retain confidence that Xi's administration isn't just losing it.

Being an astute and seasoned politician, Xi should realize by now that he must cede more power to Li and other ministers who he simply hasn't trusted to date to carry out the difficult work of restructuring. The more he keeps out of their way, the less insecure his own position becomes, too - not least because Li and the reformers still need his political cover.

It's too early to be so sanguine, but perhaps Cultural Revolution lite won't be China's fate after all.

New normal forces China to return to its core socialist values

It's long been argued that China isn't growing nearly as fast as its official GDP numbers say. Unfortunately, those who make this argument tend to think that such it means the communist dictatorship is far more tenuous than it seems and that an agitated populace and civil society means the country is actually on the brink of social upheaval or even revolution. In fact, probably the exact opposite is true.

First of all, let's say the extreme China bears are right and that China has in fact been growing at merely 1 to 2 percent since 2014 or even 2013. They would almost certainly attribute this to a deflation problem which is much worse than acknowledged - a general decline in price levels across the economy.

The problem is, it's inflation that causes social unrest, not deflation - rising prices, not falling. Where are the bread lines in China? True, food prices have risen faster than other consumer prices, but nowhere near the double-digit tempo required to spark public demonstrations. China's not exactly ripe for an Arab spring.

The situation is similarly loose in employment, even with the massive job cuts soon coming down the pike. Traditionally, Beijing has been tense about economic growth because so many young Chinese were entering the workforce every year. But this changed around 2011 or 2012, when the working-age population peaked. A cause for alarm since then has been the striking fact that Chinese wages have risen considerably faster than Chinese productivity: a classic symptom of a tight labor market. This situation has worsened China's global competitiveness, as its workers' earnings continued to rise even as the real economic value they produced flatlined and, more recently, even fell.

Seen in this light, China's present economic woes are actually a welcome correction of imbalances that have accumulated for years, namely the disproportionate allocation of resources to the state sector, of which the SOEs are the linchpin, but which in fact comprise far more than these officially public entities, given that so many "private" companies are effectively fused to one degree or another with public interests and stakeholders. Together, this state and quasi-state portion of the economy employs perhaps a quarter to a third of the total workforce, yet commands perhaps 80 to 90 percent of all credit allocation. This distortion has finally reached breaking point: the labor and credit shortage in the purely private economy is literally screaming for some release of human and financial resources from the bloated state-driven economy which can no longer cannibalize it without taking down the whole house.

The good news for China, then, is that it's not suffering from scarcity but from misallocation: it has enough productive capacity but poor (financial) circulation and (economic) distribution. It thus follows that growth per se isn't the imperative in the "new normal" so much as how it's spread across the real economy. Depending on where you're situated in the vast system, the optimal right now could be slow growth, fast growth, no growth, or even downsizing.

The new normal, in other words, is already forcing China to rediscover its core socialist values. With inequality easily among the worst in the world - and especially pernicious because it's so intimately tied with corruption - the era of quasi-fascistic state capitalism or "red" capitalism has come to a well-deserved end, if not in reality yet then at least in ideology.

It's not a good time to be a billionaire or even millionaire in China: you're now expected to fall in line with a leadership that's unabashedly neo-Maoist in its leanings. Unfortunately, you have little cause to complain: you've had your time in the sun, you've acquired far more than the average citizen can still even dream of, and you're simply being told that money can't buy you influence like it used to. You may consider yourself too important to China's development to be put out to dry, and in your mind the party much prefers you stay put rather than emigrate and worsen the country's brain and talent drain; but as the party sees it you're only deluding yourself to think you're as indispensable to China as China is to you.

Instead, like the rest of Chinese society, it's time you simply shut up and behave yourself, and help the glorious party redistribute your goodies in faithful Marxist-Maoist fashion to the masses.

Jia Jia incident shows futility of dissent in Xi's China

Popular Tencent reporter Jia Jia's disappearance is not merely the latest instance of the comprehensive crackdown on dissent in Xi's China; it is also a stunning indication of just how futile and ineffectual such opposition has become.

The fact that Jia Jia himself has apparently denied personal involvement or complicity in a letter by party dissenters calling for Xi's resignation is a clear proof that these opposition figures' obvious attempt to garner public sympathy for their position has been thoroughly thwarted. There can be little doubt that, as we speak, a whole host of people with any suspected connection to the piece originally published on Wujie News are in detention and being ruthlessly interrogated - that is, if they haven't already made overtures to the authorities to avoid such a fate (which might entail revealing secret information about the authors and publishers, even if it means betraying friends or associates).

In the wake of this incident, far from a weakened Xi Jinping with less control over a more disobedient party bureaucracy, an even more authoritarian one-man system could well emerge - with internal dissension even less likely to surface in any publicly visible fashion.

In recent months, it would appear that disenchantment within the party with Mr. Xi's creeping totalitarianism has reached a fever pitch; that at least some voices of dissent have leaked out was hardly surprising. Yet the true balance of power is now being unmistakably exposed: dissent is essentially futile, even suicidal - no matter how widespread it might be in the party ranks, there's nothing anyone can do about Xi's complete stranglehold on the military and the police state. And not many Chinese either within or outside the party want to go to jail to make their discontent heard.

As I posted recently, China is on the verge of Cultural Revolution lite. It's now open season on disgruntled party officials, opposition journalists and intellectuals, independent activists, suspected foreign sympathizers, and just about anyone who dares question the legitimacy of Xi Jinping's new political line in any way, anytime and anywhere.

What Donald Trump means for Chinese dissidents: an end to their illusions

While Donald Trump has clearly stated that he didn't endorse the Tiananmen crackdown, he did so by reiterating that it was the communist regime's "strength" successfully crushing a "riot". Wu'er Kaixi isn't amused.

But the rise of Donald Trump signals the end of illusions: and Chinese dissidents have clearly clung to theirs.

Trump is simply stating a fact as he sees it: that the pro-democracy movement of 1989 never really stood a chance. In his realist worldview, a nonviolent protest against a violent authoritarian state cannot possibly succeed unless the state itself ultimately sides with the protesters. Whereas the Soviet communist empire fell because its own leaders no longer wanted to preserve it at the cost of its own citizens, Chinese communism survived because its leaders fiercely did. Now you can call China's government exceptionally evil because of this, but that doesn't change the cold hard facts.

Deep down, though, Chinese dissidents still don't acknowledge that a violent uprising was - and remains - the only option for political change because they have been systematically excluded from the existing power structure. At the end of the day, the alternative is simply nonexistent.

A Trump presidency should shatter these illusions that have paralyzed the Chinese political opposition for so long. How Chinese reformers adjust their expectations and strategies thereafter is an open question, but first the fantasies must be eliminated once and for all.

China further tightens economic control, but the West can't really complain

An exclusive Reuters report has China unveiling a plan to effectively nationalize its zombie firms that threaten to cannibalize the economy, by allowing commercial banks - read: the giant state lenders - to swap non-performing loans to such firms for ownership stakes in them, i.e. a debt-for-equity swap.

While this isn't terribly good news for China's transition to a market-based system, it's perfectly in line with the central government's clear goal of acquiring more direct control of everyday real economic activity throughout the vast country. It would represent the most dramatic example yet of the central government - i.e. the central bank and its main constituent banks like the traditional "Big 4" of ICBC, ABC, BOC and CCB - to seize the reins of real economic management from local governments and state firms.

A month ago, I posted that China won't crash so long as it remains a communist dictatorship. In the then original CNBC report of hedge fund manager Kyle Bass warning of China's coming banking implosion, even Bass himself admitted (my emphasis):

"China's [banking] system is even more precarious when we realize that, even at the biggest banks, loans are not made to borrowers based on their ability to repay," he wrote. "Instead, loan decisions are political decisions made by the state."

There, a Westerner ironically points out the ultimate bedrock of Chinese stability as if it were a guarantee of instability. As I pointed out in my post (my present emhpasis):

But like so many other Western experts, Mr. Bass clearly misunderstands China: it's an Asian autocracy, not a Western democracy. Those who consider him a prophet for forecasting the US subprime mortgage crisis in 2007 are quickly countered by those who point out how badly his prediction that Japanese bonds would meltdown in 2010 turned out. There's good reason to believe that on China, his Asian misinterpretation will be repeated, rather than his Western prescience. If Japan is an Oriental command-and-control system that defies the logic of Western markets, China is far more so.

Today's news would appear to confirm such an assessment.

Business Insider, however, notes that authoritarian China is actually following the Western playbook: its republication of the Reuters report is titled, "China is preparing to let its banks do something the West has been doing for years", a clear reference to the government and especially central bank intervention that supposedly "free market" Western economies have come to rely on since the financial crisis.

While it's likely that China's bailouts will ultimately far exceed anything in the West, it's still somewhat amusing that Beijing can still claim to be following its more "market-friendly" peers.

50 years later, China may be on brink of "Cultural Revolution lite"

Fifty years ago this spring, Mao Zedong launched the Great Proletarian Cultural Revolution: a deliberately calculated upheaval to secure his power as supreme leader of the Chinese communist revolution. His primary target was the communist party itself: the party-state which he himself had played such a central role in establishing from years before taking power in 1949. Wielding the zealous youth movement of the red guards and a complete personal control of the PLA through subordinates such as Marshal Lin Biao, Mao managed in short order to all but wipe out this vast and well-organized apparatus, unleashing a nationwide reign of chaos and anarchy that ultimately left in its wake a trail of death and persecution from which Chinese society has arguably never fully recovered.

A half-century later, there are quiet but unmistakable signs that the CPC is about to undergo another internal self-purgation - nowhere near as costly or violent, but with potentially far-reaching consequences nonetheless for both state and society at large. Its architect, ironically enough, is a man who experienced the ordeal of Mao's Cultural Revolution firsthand as a teenager: president and party secretary Xi Jinping.

Mr. Xi stands at a crossroads in his expected decade-long tenure as China's paramount leader that began in late 2012 to early 2013. He has amassed enormous personal power widely reckoned as exceeding that of any Chinese leader since Deng Xiaoping, but in his own estimation, he's only gotten warmed up so far. This year and next - when the nineteenth party congress will afford him opportunity to appoint his own loyalists to key positions in the central and regional governments - he will find out whether the supreme authority he seems to hold in theory actually translates into effective governance in practice, i.e. if it's more than puffs of hot air.

He is clearly in a crisis, if even a relatively slow-rolling one: especially since China's economic miracle seemed to really hit the rocks last summer, his position at the top has become chillingly isolated. His signature anticorruption campaign has alienated much of the bureaucracy that Beijing relies on to run its vast empire on a day-to-day basis: it has succeeded in striking fear into the officialdom, but now the trillion-dollar question has become, Will the gain of a less blatantly corrupt state apparatus be nullified by the paralysis, demoralization, and bitterness among party elites that accompanies it?

Post-Tiananmen China, after all, has fundamentally been built upon a foundation of graft, patronage, and rent-seeking by the communist ruling caste and its crony elements in the emergent private sector. For two decades, this arrangement of state capitalism, fusing as it did commercial and governmental interests as tightly as possible, was sacrosanct as far as Beijing was concerned: it was just the formula best suited to rapid economic growth and monopolization of political power, with each of the two mutually reinforcing the other, and creating enough general prosperity along the way to satisfy the masses with ever-bigger scraps and crumbs from the extravagant table of the 1 percent (or 0.1 percent). For these big beneficiaries of the gilded era, the sword of Damocles which ever hung over their heads was the prospect of popular regime change and democratization, for that would end their big feast of luxury which they paid for largely through the expropriation of productive value from the general population; what they never could have feared, however, was that their own leadership would somehow upset the status quo by undermining the whole premise of the rentier-state system in the name of internal socialist purification.

Yet Xi Jinping has, in effect, now passed the point of no return in this radical new direction, so far as the party elite sees it; had he limited his graft-busting crusade to the acceptable goals of purging rivals and scoring populist points with the media and citizenry, they wouldn't have been unduly disturbed; even had he been far more intensive and extensive in the breadth and scope of such efforts, the ruling caste would merely have scrambled to curry his personal favor to make sure they were in the "in" crowd of a much reduced plutocratic clique.

But incredibly, there seems to be at least a shred of authenticity to Xi's professed adherence to socialism and even Marxism - and this is what has shaken the post-Tiananmen CPC to its core, producing a gathering internal party crisis not seen in decades.

Much as Chinese reformers have been aghast at Mr. Xi's apparent re-embrace of communist orthodoxy, in practical terms it is the party's predominant status-quo element which has been even more petrified by it: it amounts to nothing less than a declaration of war on the post-Tiananmen party-state's de facto modus operandi.

As late as 2014, it would appear that the party's powerful vested interests - comfortably linked to the former regimes of Jiang Zemin and Hu Jintao - were still hopeful that Xi and his graft czar Wang Qishan weren't actually serious about attempting a full-blown heart transplant on the party-state. Surely, they were thinking, they couldn't be that crazy?

As of 2015, however, they could no longer have any illusions that it was still "business as usual" as they had grown accustomed to. By then, Xi was consolidating his personal control of the state security services and military, just as the anticorruption campaign, far from easing, instead intensified. It was obvious now that Xi wanted a thorough reboot of the entire leadership and administrative structure which had served China so well since the early 1990s: namely, he no longer wanted a collective leadership and rule by consensus in which he was first among equals; rather, he wanted to establish a degree and style of top-down rule flowing from one man that would take Beijing back to the pre-Tiananmen era.

This was simply crossing the line: Xi was basically putting his foot down and telling party apparatchiks that they'd better start thinking and acting like communists for a change. And if that meant they had to toe his personal line as a mini-helmsman in the pedigree of Mao himself, so be it. Party elites could not have helped but feel a deep sense of betrayal and disgust: they hadn't exactly pursued their careers with the expectation that their primary reward would be the mushy satisfaction of building a classless society.

While it was evident even in 2013 that Xi intended such a comprehensive overhaul, by 2015 he was clearly running out of patience. The dramatic meltdown of China's stock market in July and August, along with the unexpected devaluation of the yuan, brought into sharp relief the difficulty of transitioning the economy from manufacturing and heavy industry to services and consumption: it became clear that the urgently needed restructuring of the state enterprise sector had barely even begun, and that this was as ever a result of the central government's lack of muscle in enforcing its edicts at the provincial and local levels. But another big shift had clearly occurred: China's problems were now reverberating around the world via the financial markets, and just about everyone now realized that the fate of its $10 trillion economy would weigh heavily on their own fortunes. Unsurprisingly, with discontent at its own political and economic elite and a general sense of both physical and economic insecurity rising dramatically, much of the rich world now looked at Xi Jinping with dark undertones, as a broad narrative that China was hurtling towards an abyss because a committed Maoist who hated markets was now calling the shots greatly exacerbated the pessimism over its future prospects, which increasingly bordered on sheer doom and gloom.

Xi was infuriated by this. In his own view, he had always been clear about his commitment to retooling the Chinese economy and correcting the deep societal imbalances that had accumulated in the generation since Tiananmen; now, however, the chronic foot-dragging by the party-state's own vested and sectional interests was not merely threatening to snuff out this transition stillborn, but the very obstructionists appeared keen to capitalize on such a fiasco both to erode his authority and, even more seriously, destroy his credibility before an anxiously watching global community. By the end of summer 2015, judging by leaked revelations in state media - not all of which he personally approved of - Xi found himself virtually at war with the CPC bureaucracy.

That leads us to the current predicament. As of spring 2016, Mr. Xi finds himself in a spot that Mao himself would have recognized: unrivaled power at the apex of the giant party-state apparatus, yet a frustrating gap between desired versus actual control of policy implementation on an immediate everyday level; and much worse, a yawning chasm between the bureaucratic-inertial status quo and the perceived urgent shift that must be undertaken to maintain the CPC's long-term hold on power.

A half century ago, in the spring of 1966, Mao saw that China's recovery from the Great Leap Forward (1958-1962) had been a material boon but was thereby becoming a major threat to the revolutionary character of the new society; he would rather push the Chinese people back into starvation than see them settle into a global socialist struggle fatigue on account of full bellies. It so happened, of course, that he also badly wanted renewed upheaval for his own interests: a flat and normal China was patently incompatible with his political nature and ambition, whereas a China that lurched from one existential crisis to another was, as ever, one that could only prevail under his wartime guidance.

Today, Xi Jinping's dilemma has a distinct "Mao lite" undertone to it. In stark contrast to the CPC as a whole which falls under his authority, Xi seems to genuinely believe that the future lies not in diverging even further from the Maoist founding principles of the party-state, but in actively re-embracing and retooling what can still be salvaged of that very legacy. Those who are still inclined to dismiss his professed desire to retrench Chinese communist political culture as a clumsy propaganda ploy now do so only at their own peril: what Xi aims for is nothing less than a massive redistribution of wealth from the corrupt party and party-linked elites to the broader population, and whatever technicalities of policy he ends up employing to achieve this, his basic strategy of enlisting mass support against the vested interests of the party-state apparatus and the party elite is such an obvious one that we can dub it as a kind of "Cultural Revolution lite" before it's even launched.

None of this is to suggest that the horror shows of the late 1960s are coming back to China in any meaningful way, shape, or form. Nor does it open any possibility that Xi can exceed his two-term limit as paramount leader. What it means, however, is that we have crossed another inflection point in modern Chinese history no less significant than that of 1949 or 1978: namely, that China stands on the cusp of a new wave of majoritarian-authoritarianism that seeks to redress the blatant minoritarianism of the go-go reform and opening era. Once more, it is the pure cadre of an incorruptible central leadership that will pose as the champions of popular will over and against the myriad structures of local and regional despotisms. Once more, the corruption of privileged individuals within the system will be used to justify more draconian control of all individuals, not less. And once more, the party will create and coordinate purportedly popular organizations and associations outside the formal power vertical of the state apparatus to squeeze out what space remains for grassroots or autonomous activity - that is, the post-Mao civil society.

Cultural Revolution lite will, like its antecedent, have the principal goal of promoting a communist identity as the essence of the "New China", but with a key augmentation in its arsenal to achieve it: it will seek to present the totality of modern Chinese history as one of such inevitability that even the costliest policy blunders and absurdest ideological contradictions since 1949 don't tarnish the party's good name but paradoxically bolster it even more. Such unabashed propaganda and spin-doctoring, which to date has relied primarily on outright censorship of incorrect views and inconvenient facts, will eventually morph into more nuanced defenses of "necessary evils" and more fervent and even more sophisticated attacks on "Western hypocrisy" - the latter which promises to be the easier the deeper the West plunges into its own identity crisis.

At the end of the day, even Xi Jinping appears to concede that China won't be a one-party communist dictatorship forever: even he envisions a "free" society at the PRC's centennial in 2049. But it will be a free and open society that owns the entirety of its checkered past, not just the parts that the black-and-white, absolute good-versus-absolute evil Judeo-Christian or "universal values" worldview deem acceptable. Indeed, that will be the ultimate triumph of communism in its Chinese incarnation: that communism didn't change China, but that China changed communism.

The battle lines have been drawn.